Stamp duty holiday: Why I’d buy FTSE housebuilders, real estate agents, and REITs

The recent stamp-duty changes may boost property sales. I believe shares of FTSE housebuilders and estate agents are likely to benefit in the coming months.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Models of houses on top of pound coins

Image source: Getty Images.

The chancellor recently introduced a temporary holiday on stamp duty on the first £500,000 of all property sales in England and Northern Ireland. The changes will be in effect until 31 March 2021. According to Zoopla Property Group, “nearly nine out of 10 transactions will no longer be subject to stamp duty. And in London and the South East, home to more expensive properties, buyers could save up to £14,999 overnight.”

Until the announcement, there was no stamp duty on transactions below £125,000. Housebuilders, estate agents, and those looking to buy a property, including buy-to-let investors, have cheered the substantial stamp-duty change. As the Covid-19 lockdown ends, there are early signs that the housing market is likely to gain from increased activity that may follow in the summer. Let’s now take a closer look at how share investors can benefit.

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Which housebuilders to consider

Over the years, real estate has continually proven to be a solid investment. According to the most recent figures from the Office for National Statistics, “UK average house prices increased by 2.1% over the year to March 2020… London’s average house prices increased by 4.7% over the year to March 2020; this is the largest 12-month growth London has seen since December 2016″.

Although we do not yet know the full impact of the coronavirus-related developments on house prices since March, the sector is hopeful that prices will hold up well in the rest of the year.

Both the  FTSE 100 and the FTSE 250 indexes offer plenty of choices when it comes to property investing. Which property companies am I watching right now? If you’re interested in researching housebuilders, then Barratt DevelopmentsBellwayBerkeley GroupCountryside PropertiesCrest NicholsonPersimmonRedrowTaylor Wimpey, and Vistry Group deserve to be on your radar.

You may also want to do due diligence on real estate agents such as Foxtons, Rightmove, and Savills. Year-to-date, their share prices are down 57%, 13%, and 29% respectively.

How about REITs?

The UK property market is one of the most significant sectors of our economy. Property is a tangible asset that many people are familiar with. But that doesn’t necessarily make it a better investment than buying into FTSE shares of companies within the industry.

Investors may also want to consider publicly traded real estate investment trusts (REITs) for a long-term retirement portfolio. 

The REIT regime was introduced in the UK in 2007. These real estate investment trusts own and manage property on behalf of shareholders. They can own residential property and/or a portfolio of commercial real estate such as retail outlets, office buildings, hotels, or warehouses. I regard a REIT as a tool that enables me to own a wide range of property assets without buying property myself.

There are strict regulations governing publicly listed REITs in the UK. According to the website of the London Stock Exchange, “there are over 50 REITs with a market capitalisation of over $70bn listed” on the exchange. Several of these investments trusts that have proved popular with investors include British Land, Derwent LondonHammerson, Landsec, SegroTritax Big Box, and Urban Logistics.  

2020 has witnessed a downturn in broader equity markets. Yet investor confidence is beginning to return both to the housing market and FTSE stocks. Market participants now have the opportunity to pick up some quality stocks and REITs that operate in the housing industry relatively cheaply.

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tezcang has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co, Landsec, Redrow, Rightmove, and Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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